Replying to Julie Anne Genter on sugar taxes

This week the Green Party’s Julie Anne Genter and I wrote for the Spinoff on sugar taxes, presenting the ‘for’ and ‘against’ cases. Julie Anne’s was published first presenting the ‘for’ case, followed by my piece. Here’s a taster of mine, but do read both pieces:

You wouldn’t trust an economist to give you a smear test. So is it reasonable to expect those working in health to grasp economics? But still we listen to sugar tax proponents who don’t understand how consumer taxes work, says the NZ Initiative’s Jenesa Jeram.

I’d like to thank Julie Anne for her time. I’m aware she’s fighting an arguably a bigger battle at the moment in the form of the Mt Albert by-election, so I really appreciate her willingness to still engage in policy debate.

Now, I wrote my piece blind, filing it before seeing Julie Anne’s argument. Nevertheless, I think I anticipated and addressed most of her points. Namely:

The Initiative is not denying obesity is a problem.

The costs of disease are likely overblown.

Support from experts in public health does not mean the evidence for a tax is robust, and that an expertise in health or science does not make one an expert in policy consequences.

The burden of disease might be suffered by those in lower socio-economic groups, but that doesn’t stop the tax being regressive. No matter which way you look at it, you’re making poor people poorer.

Evidence from Mexico should be taken with a handful of salt.

Ring-fencing the revenue of a sugar tax is nothing but a meaningless political platitude.

Comparison to cigarettes and reduced consumption due to excise means a sugar tax would need to be really, really high and very comprehensive.

“We must do something, anything, even if we don’t have the evidence that a sugar tax will work” is no reason to pursue this policy, because testing this policy could still cause harm.

Now for the things I missed:

I was aware that “UK already that the policy has resulted some food and beverage companies changing recipes to have less sugar” but wasn’t sure of the extent this was occurring. Regardless, we’re still not any closer to learning whether this makes a smidgen of difference to health outcomes. If customers prefer the more sugary variety (remember, diet soda formulations exist already), then they won’t change their habits. Soda is also just one form of sugar in a person’s diet. It is total calorie intake that matters (and even then, as I mentioned in my piece, we’re all metabolically different).

While Genter tries to make the case that this tax is to punish producers and distributors (or at least hold them accountable), it still doesn’t take away from the fact that the tax is most likely going to be passed on to consumers. It is consumers who will pay the price. So all the arguments about regressivity stand.

Genter also claims the following:

The other line of argument the NZ Initiative might suggest is that we should ditch our public health system for a private, user-pays one and people with chronic disease should pay their own way. Given they are more likely to be on low incomes, I don’t think this will solve the problem, and I believe most New Zealanders value our public health system. Private health care isn’t working in the US.

Well, actually, we haven’t suggested that. But what we will suggest is that when you have a system of taxing unhealthy behaviours and subsidising healthy behaviours, it begins to look a lot like a private user-pays system anyway. Those who take on risky behaviour don’t pay higher premiums, but they will pay more in taxes. The concern about those on low incomes is equally applicable to sugar taxes, again, because of the regressivity.

And if New Zealanders really value our public health system, then it is unclear what exactly the problem is. As long as funds are transferred from the healthy to unhealthy, the system is just functioning as it should. Just as you wouldn’t call the welfare system a failure for transferring funds from rich to poor. What could be a problem is moral hazard: the extent to which people change their behaviour because of the system: are they taking on riskier behaviour than they otherwise would have because they know the safety net exists?

I’ve chosen to ignore the idea that this is all some kind of industry counter-claim conspiracy. Frankly, I think the evidence (or in this case, lack thereof) speaks for itself.

1 Comment on Replying to Julie Anne Genter on sugar taxes

Firstly, in regards to the last point, let’s not be politically correct. The NZI is a special interest group with its own ideological beliefs. Personally, I think there is nothing wrong with the NZI pursuing its own ideological agenda. The problem comes when it attempts to present its ideological statements as an objective fact.
Furthermore, I don’t believe NZI is opposed to the sugar tax out of concern for the finances of low income households or for individual health.

Theoretically speaking, as has been pointed out previously, any attempt to punish firms through increased taxes would result the costs being displaced onto consumers. However, as is the case with other industries in New Zealand, such as meat & dairy, who have are the beneficiaries of regulatory capture. Their products are also unhealthy, but they are in a position to take advantage of direct and indirect subsidies which offset any increases in prices at the check out.

The only way to determine objectively whether a sugar tax has any benefits would be to conduct a NZ pilot study. I personally think it would be better to educate people on the poor health outcomes associated with sugary drinks. A tax for this end would be justifiable.